What is your first stop when you are in dire need of additional funds to support the growth of your business? The vast majority of business managers apply for a small business loan to invest in new projects, harmonize the cash flow, manage operating costs, and improve the credit score. As compared to other funding options, angel investing, crowdfunding or funding from friends or relatives, a business loan from a bank or a private lender is a faster and secure medium of funding. Usually, small business loans are of two types – unsecured and secured business loan.
What is a Secured Business Loan?
In order to get a secured business loan, the borrower has to offer some collateral to the potential lender. Collateral can be any asset given by the borrower to the lender as security. It can be in the form of car, equipment, property, or a plant. Whenever you take out a loan from the back or an alternative lender, you are obligated to pay back the borrowed amount. This clause is embedded in the very document signed by the borrower.
Making on-time repayments instills confidence in the lenders. And next time, they offer loans on better financial terms. On the other hand, if you fail to make the repayments on time, the lender will take control over the collateralized assets, and they have the legal right to cover loses by selling your assets.
So, you need to research and think vigilantly before applying.
Why do you need a Secured Business Loan in the first place?
Often times, business managers run out of financial resources, and they need extra funding to keep the machine running. In this situation, a business loan acts as a security blanket. The small business owner can use the funds to hire more employees, remodel, or purchase heavy equipment. Although funding is the solution to many problems, borrowing and lending is a risky business. Lenders have to secure their money so, they ask for the collateral. If you are a risky borrower, this calls for concern. But if you clear off your pending debt on time then this a wonderful opportunity to get rid of any financial problem. Multiple secured funding options are available in the market.
5 Secured Business Loans for your business
For a secured business loan, you don’t need an outstanding credit score or a first-class financial position. The collateral provides all the security that the lender needs. So, here are the top five secured business loans:
- Business Lines of Credit
A business line of credit is the best funding option to get you out of a short-term financial crisis. The borrower has access to the revolving credit, once the borrower pays back the withdrawn amount the credit goes back to the original loan amount. So, if you need a business line of credit with lower interest rates and APR, offer collateral to the lender.
In order to enjoy the perks of a Line of Credit, you must be running a business for more than a year, have 500 as a credit score, and generating an annual revenue of $ 180K. Apply and get a loan ranging from $ 5K – $1 million with 7 – 25% interest rate in 24 hours.
- SBA Loans
Whenever we are compiling a list of the secured loans, the list is incomplete without SBA loans. Technically, Small business Administration doesn’t directly offer small business loan all the SBA loans are guaranteed by the Small Business Administration. Basically, SBA offers a guarantee to the lender so that they can offer loans to small companies. You can get an SBA on the lower interest rate and flexible payment terms. Apply for the 7(a) Loan Program, the CDC/504 Loan Program and the Microloan Program. You will be getting the funds from the commercial banks directly and these commercial banks will accept vehicles, jewelry, and heavy equipment as collateral. Don’t miss out on this splendid opportunity.
- Term Loans
A term loan is the most used funding option by small business owners. The borrowing mechanism of a typical term loan is the simplest; you get a loan from the lender and pay it back with interest. Most business managers go to the bank and they ask for the collateral. Every bank has different criteria, so the list of the collateral might vary. Usually, they ask for the property, vehicles, or heavy equipment. Through a term loan, you will get a loan of $25,000 to $500,000 and you have to pay it back in 1 – 5 years.
- Equipment Financing
Equipment financing is the most suitable type of secured business if you are hunting for funds to upgrade your gadgets or need money to pay for the repairmen of the broken equipment. Equipment loan works on the same grounds as a car loan. Here, the equipment purchased by the borrower acts as the collateral, so there is no need to sacrifice your other valuables. Instead of traditional banks, you can avail affordable equipment financing from an alternative lender.
- Merchant Cash Advance
Get instant working capital from a merchant cash advance . In the case of merchant cash advance (MCA), there is a partnership between credit card companies and merchant cash advance lenders. This type of secured lending is perfect for small business owners who wish to pay back the loan from their ongoing credit card sales. So, save yourself from the set schedule of payments and payback, on a daily basis.
Pick any of these secured business loans to move your small business in the right direction. We have also listed the pros and cons of secured business loans so that you make a wise pick.
Pros and Cons of Secured Business Loan
Secured business loans have multiple benefits, such as:
- The borrower can buy the assets on the lower interest rate and on affordable factor fee.
- Secured business loans are easier to get even with a poor credit score and inconsistent cash flow.
- You have a say in the repayment schedule.
Now that you know all the plus points of a secured business loan, have a look at its drawbacks:
- Loss of your valuables, if you fail to make the repayment on time.
- Varying interest might disrupt the cash flow.
Study all the positive and negative points before you apply for the secured business loan. All factors considered, if you think your business can benefit from a secured business loan, then head over to our website and apply away. For more information and tips to secure the best funding, follow us on Facebook (@Onlinecheck) and Twitter (@Onlinecheck). If you have any question, feel free to call us on our toll-free number at (833) 827-4412, our loyal and keen financial advisor will answer every question and guide you throughout the way.